ISDA 2016 Variation Margin Protocol

Open from August 16, 2016

 

FAQ last updated: June 28, 2017

 

ISDA has prepared this brief summary to assist in your consideration of the ISDA 2016 Variation Margin Protocol (the “Protocol”). Capitalized terms not otherwise defined herein have the meanings ascribed to them in the Protocol documents.

THIS SUMMARY DOES NOT PURPORT TO BE AND SHOULD NOT BE CONSIDERED A GUIDE TO OR AN EXPLANATION OF ALL RELEVANT ISSUES IN CONNECTION WITH YOUR CONSIDERATION OF THE PROTOCOL OR THE RELATED DOCUMENTS. PARTIES SHOULD CONSULT WITH THEIR LEGAL ADVISERS AND ANY OTHER ADVISERS THEY DEEM APPROPRIATE AS PART OF THEIR CONSIDERATION OF THE PROTOCOL PRIOR TO ADHERING TO THE PROTOCOL. ISDA ASSUMES NO RESPONSIBILITY FOR ANY USE TO WHICH ANY OF ITS DOCUMENTATION OR OTHER DOCUMENTATION MAY BE PUT.

These FAQs are grouped in three sections:

    • General Questions
    • Protocol Documentation
    • Protocol Adherence Mechanics

 

General Questions

1. What is a “protocol” and how does this Protocol differ from previous ISDA protocols?

An ISDA protocol is a multilateral contractual amendment mechanism that allows for various standardized amendments to be deemed to be made to the relevant Protocol Covered Agreements between any two adhering parties. It builds on the principle that parties may agree with one or more other parties that certain terms and provisions will apply to their respective relationships (unless and until they specifically agree otherwise).

Market participants indicate their participation in the protocol arrangement by following the adherence instructions posted on the ISDA website (www.isda.org), which includes submission of a letter (an “Adherence Letter”) and payment of an adherence fee of US $1,000.00.

Like some previous ISDA protocols, this Protocol includes several different options for making amendments and also provides for the bilateral delivery of information between Adhering Parties. In order to select and establish the amendments that will be effective with other parties, a party that submits an Adherence Letter must also deliver a completed set of elections and information in the format provided in the Protocol (a “Questionnaire”) to another Adhering Party for the Protocol to take effect between those two parties.

ISDA together with Markit have developed a technology-based solution (“ISDA Amend”) to automate the process of providing the necessary information and elections to permissioned counterparties. ISDA Amend is available at: http://www.markit.com/product/isda-amend.

2. What does the Protocol do?

The Protocol is intended to address the requirements of the rules set out below (“Covered Margin Regimes”), by allowing parties to put in place derivatives documentation that is compliant with the variation margin requirements of the Covered Margin Regimes. The Covered Margin Regimes are:

  1. the margin rules adopted by prudential regulators pursuant to § 4s(e)(2)(A) of the CEA and § 15F(e) of the U.S. Securities Exchange Act of 1934, as amended (“PR Rules”),
  2. the margin rules adopted by the CFTC pursuant to § 4s(e)(2)(B) of the CEA (“CFTC Rules”),
  3. the margin rules adopted by the Financial Services Agency of Japan pursuant to Article 40, Item 2 of the Financial Instruments and Exchange Act (kin’yuu shouhin torihiki hou) (Act No. 25 of 1948, as amended) and its subordinated regulations (“Japan Rules”), 
  4. Guideline E-22, Margin Requirements for Non-Centrally Cleared Derivatives issued by the Canadian Office of the Superintendent of Financial Institutions (“OSFI”) in February 2016 (“OSFI Rules”),
  5. the regulatory technical standards on risk-mitigation techniques for OTC-derivative contracts not cleared by a central counterparty adopted by the European Commission on October 4, 2016 (“EMIR Rules”),
  6. Australian Prudential Standard CPS 226 Margining and risk mitigation for non-centrally cleared derivatives published by APRA on December 6, 2016 (“Australia Rules”), and
  7. the margin rules adopted by the Swiss Federal Council pursuant to Article 110-111 of the Financial Market Infrastructure Act as well as Articles 100 to 107 and Annexes 3 to 5 of the Financial Market Infrastructure Ordinance ("FMIA Rules").

By exchanging Questionnaires in a matching process explained further below, a counterparty pair can make one of four types of documentation changes using the Protocol:

  1. Amend an existing master agreement to add a new Credit Support Annex ("CSA") for variation margin on terms that are determined by the Protocol and the parties’ Matched Questionnaires (the “New CSA Method”).
  2. Amend an existing master agreement and CSA by creating a replica of that CSA and then amending it to comply with the applicable Covered Margin Regime(s) (the “Replicate-and-Amend Method”). The Replica CSA covers only variation margin for new transactions; variation margin terms for legacy transactions remain under the existing CSA.
  3. Amend an existing CSA to make it comply with the applicable Covered Margin Regime(s) (the “Amend Method”).
  4. Create a new ISDA 2002 Master Agreement (defined as a "Protocol Master Agreement") with a new CSA for variation margin. The terms of the new Master Agreement will be determined by the Protocol and the parties' Matched Questionnaires. The terms of the new CSA will be determined by the New CSA Method.

3. What do I need to do to ensure I have exchanged “Matched Questionnaires” with my counterparties?

When parties exchange Questionnaires using ISDA Amend or another means of delivery permitted under the Protocol, certain combinations of elections are recognized by the Protocol as an agreement to update existing documentation or produce a Protocol Master Agreement using one of the Methods described and others are not.   To differentiate between those combinations that produce outcomes and those that do not, the Protocol specifies conditions that a pair of exchanged Questionnaires must satisfy to be deemed “Matched Questionnaires.”  If the Questionnaires exchanged by the parties do not meet the conditions to become Matched Questionnaires, then the Protocol does not have any effect between them and the parties can amend and resend their Questionnaires to each other until they do meet the required conditions. It is therefore important to understand the conditions that must be met to have Matched Questionnaires. Please see our Flowchart to determine whether parties have Matched Questionnaires under the Protocol for a visual aid.

One reason for requiring parties to have Matched Questionnaires is that there are some terms in the Protocol that are considered sufficiently important that no outcome is provided if the parties do not agree on those terms.

The key terms for the parties to agree on in order to have Matched Questionnaires are set out below.

  1. Whether to create a new Protocol Master Agreement or work with an existing Protocol Covered Agreement.
  2. If the parties are creating a new Protocol Master Agreement, the governing law of that agreement.
  3. If the parties are working with an existing Protocol Covered Agreement, whether to use the New CSA Method, Replicate-and-Amend Method, or Amend Method (and if the parties both agree to use more than one Method, a hierarchy in the Protocol determines which Method will apply).
  4. If the parties are using the New CSA Method (including where they are creating a new Protocol Master Agreement), there are three commercial terms for which the Protocol has a “default setting” outcome, but for which either party can require specific agreement by selecting a particular non-default value in its Questionnaire. These are: Minimum Transfer Amount; applicability of Negative Interest; and the Notification Time (although the Notification Time only requires specific agreement where a party has selected 1pm London time for an English law CSA).

Another reason for requiring Matched Questionnaires is to ensure that the parties provide enough information in their Questionnaires to produce a satisfactory outcome under the Protocol. These requirements are that the two parties have each delivered a Questionnaire to the other, and that between them they have either selected at least one Covered Margin Regime, or, if they are using the New CSA Method, both parties have elected to use the Regime Agnostic CSA.

4. How does the Protocol determine which Covered Margin Regime(s) apply to a counterparty pair?

When two parties exchange Questionnaires, each party selects each Covered Margin Regime it wants to use when facing the other party, based on the Covered Margin Regime(s) that apply to it when facing that party under applicable law. For example, if Party A is subject to CFTC Rules and OSFI Rules when facing Party B, Party A would select those two Covered Margin Regimes in the Questionnaire it delivers to Party B. If Party B is not subject to any Covered Margin Regimes when facing Party A, it can select “None of the Above”. The Protocol supplies contractual terms that were developed to be compliant with the Covered Margin Regimes selected by either counterparty in Matched Questionnaires (the “Designated Regime Combination”). Where the requirements of multiple Covered Margin Regimes in a Designated Regime Combination are different, the Protocol applies the strictest of those requirements.

There is also the possibility for parties to use a “Regime Agnostic CSA” approach, in which they do not specify any Covered Margin Regimes. This is described further below.

5. I want to amend an existing derivatives contract. What existing agreements does the Protocol cover?

The Protocol can be used to amend existing written agreements that are either ISDA Master Agreements, or another form of master agreement that uses one of the forms of CSA published by ISDA. This includes agreements that have been created by adhering to a previous ISDA Protocol or through the use of an “umbrella” ISDA Master Agreement.

An agreement may not be amended through the Protocol if it has certain non-standard features, i.e.: it is limited by its terms to governing a single transaction; or it has more than one CSA providing for variation margin.

6. I wanted to create a new Master Agreement and CSA. How are the terms of that agreement determined?

Parties can use the Protocol to create a new ISDA 2002 Master Agreement (defined as a "Protocol Master Agreement") with a CSA for variation margin, by agreeing in Questionnaires to enter into a Protocol Master Agreement and the governing law of that Protocol Master Agreement (from a choice of New York, English or Japanese law). The terms of the new Master Agreement will be the default terms of the published form of ISDA 2002 Master Agreement, together with the terms specified in Paragraph 6 of the Protocol as the Schedule to the Master Agreement. These include the governing law, Termination Currency, certain provisions relating to FX transactions, and terms applying certain ISDA Protocols to the new Master Agreement, where both parties have previously adhered to the relevant Protocol. (The previous Protocols are the ISDA August 2012 DF Protocol, the ISDA March 2013 DF Protocol and the ISDA 2013 EMIR Portfolio Reconciliation, Dispute Resolution and Disclosure Protocol.) The new Master Agreement is also supplemented by a New CSA, in the form matching the governing law of the Master Agreement.

7. How are the terms of a New CSA determined?

A New CSA is based on one of the forms of Variation Margin CSA published by ISDA in 2016. There is a form for a New York law CSA, English law CSA and Japanese law CSA. The form of CSA that applies is determined by the Protocol in one of two ways: if the parties have a CSA in place already, the New CSA will use the same form, otherwise the New CSA form is determined by the governing law of the Protocol Covered Agreement between the parties.

A New CSA consists of the “template” portion of the relevant form of CSA published by ISDA plus an “Elections and Variables” paragraph where the relevant elections and variables are produced through the Protocol. These are specified in the relevant New CSA Exhibit. These terms are determined in several different ways:

  • Some terms are simply standard terms provided by the protocol that are the same for all participants and are “hardwired” in the Exhibit.
  • Many terms depend on the results of the parties’ Matched Questionnaires, allowing the parties to customize the terms of the New CSA to their particular situation if both parties match on the relevant elections.
  • Where the Protocol provides for customization, in most cases if the parties do not match on a particular value or election, the Protocol falls back to a “default setting” value or election in order to provide a complete contractual outcome (although see the requirements for “Matched Questionnaires” above for cases where a fallback is not provided).
  • Some of the applicable terms are automatically customized based on the Designated Margin Combination determined by the parties’ Matched Questionnaires.
  • Some terms (such as notice addresses) import information supplied by the parties in the Questionnaires.

 

8. How are the terms of an Amended CSA or Replica CSA determined?

If the parties are using the Amend Method or Replicate-and-Amend Method, they already have a CSA in place with commercial terms that they have previously agreed. The Protocol generally leaves these terms in place, but provides limits to bring those terms into compliance with the applicable Covered Margin Regimes. The Protocol also adds a few new terms that are useful in facilitating compliance or managing multiple CSAs under a single master agreement (for the Replicate-and-Amend Method). The Protocol does not otherwise amend the terms of the existing CSA, and in particular it does not allow the parties to expand the scope of the existing CSA. For example, if the eligible collateral agreed between the parties contains an asset that is not permitted as collateral under any of the Covered Margin Regimes in the parties’ Designated Regime Combination, the CSA (or the Replica CSA) will be amended to remove that asset from the scope of eligible collateral. Conversely, if the parties’ existing CSA does not contain an asset that is permitted as eligible collateral under all of the Covered Margin Regimes in the parties’ Designated Regime Combination, the Protocol will NOT amend the CSA to expand the definition of Eligible Collateral.

9. What is the Regime Agnostic New CSA?

As explained above, if the parties specify particular Covered Margin Regimes in their Questionnaires, the resulting Designated Regime Combination will result in the application of terms in the relevant Exhibit that reflect the requirements of those Covered Margin Regimes.

An alternative approach under the Protocol is for the parties to use the New CSA Method with a Regime Agnostic CSA election. The approach of the Regime Agnostic New CSA is to use the Protocol to create an “Elections and Variables” paragraph using the New CSA Method, but also to identify the contractual terms in that paragraph that are likely to be subject to regulatory limits (based on observing the rules that were released as of August 2016, when the Protocol was published). The Regime Agnostic CSA election inserts language in the relevant places which provides that any election or variable produced by the Protocol is capped, floored or otherwise limited by reference to the requirements of variation margin rules under law applicable to either party (rather than providing specific contractual caps, floors or limits based on the Designated Regime Combination chosen by the parties). Parties would therefore need to look to the law applicable to both parties to understand their rights and obligations under the CSA for those terms.

The Regime Agnostic CSA will only apply if neither party has selected a Covered Margin Regime in its Questionnaire, and both parties have elected the Regime Agnostic CSA. If either party designates a Covered Margin Regime, the relevant Covered Margin Regime(s) will determine the terms of the New CSA.

10. The Protocol covers seven margin regimes. Will it cover other regimes?

The Protocol was originally published to cover four margin regimes: the PR Rules, CFTC Rules, Japan Rules and OSFI Rules, but it also contains a mechanism for the publication of “Supplemental Protocol Exhibits” that allow the Protocol to be expanded to cover additional regimes after final rules are available. Supplemental Protocol Exhibits are applied on an opt-in basis, meaning both parties need to send a Supplemental Questionnaire to apply the terms of a Supplemental Protocol Exhibit between them.

Revised Supplemental Protocol Exhibits to add the EMIR Rules to the Protocol were published on December 16, 2016. These Exhibits replaced an earlier version of the EMIR supplements published on November 17, 2016. Please see the “Protocol Documentation” section of this FAQ for further explanation of the two versions. (Note that, because this preceded the launch of functionality to exchange final Questionnaires in ISDA Amend, users in ISDA Amend see the Revised EMIR Rules Supplemental Questionnaire combined with the original Questionnaire. The original EMIR supplements are not available in ISDA Amend.)

Supplemental Protocol Exhibits to add the Australia Rules to the Protocol were published on January 20, 2017. The Australia Rules Supplemental Questionnaire is available on ISDA Amend as of March 31, 2017.

Supplemental Protocol Exhibits to add the Swiss FMIA Rules to the Protocol were published on May 9, 2017. Please note that the FMIA Rules Supplemental Questionnaire will not be made available on ISDA Amend, so it can only be exchanged using an alternative method selected by the parties in their Adherence Letters.

No further Supplemental Protocol Exhibits are currently planned.

11. Will adherence to the Protocol satisfy all regulatory requirements/obligations in connection with the Covered Margin Regimes?

The Covered Margin Regimes addressed by this Protocol have far-ranging implications for the derivatives market, including the terms under which counterparties are required or wish to transact in OTC derivatives and potential changes in current operational practice for variation margin. The Protocol is designed to provide basic standardized provisions to enable market participants to amend their existing documentation. While provision of such standardized terms is designed to provide an efficient manner for a large number of counterparties to amend their bilateral contracts to address the variation margin requirements of the Covered Margin Regimes, it cannot address all situations, products or types of counterparties. Counterparties should obtain legal advice as to whether the provisions of the Protocol address their particular situation.

12. What is ISDA Amend?

ISDA Amend initially launched in August 2012 as an online service developed by ISDA and IHS Markit, and allows users of Counterparty Manager to amend multiple ISDA Master Agreements and share regulatory representations. ISDA Amend is a free service for buy-side firms and corporates. Over 7,500 buy-side firms and corporates, representing over 60,000 legal entities, are currently subscribed to the service.

The Questionnaire for the Protocol is available on ISDA Amend as of November 25, 2016. The Supplemental Questionnaires for Japanese notification time amendments, Australia rules, Non-Netting counterparties, and Segregation Amendments are available on ISDA Amend as of March 31, 2017. The Supplemental Questionnaire for the Swiss FMIA Rules will not be made available on ISDA Amend.

13. The Protocol only covers variation margin. How is initial margin treated?

If the parties have agreed to post Independent Amounts in their existing CSA, the parties would continue to post Independent Amounts as previously agreed. The Protocol generally does not amend any Independent Amount requirements, other than provisions in the Replicate-and-Amend Method to avoid any Independent Amount in the existing CSA from being double counted when the Replica CSA is created, and an option to allow the parties to reset their Independent Amount to zero (if both parties agree) under the Amend Method or the Replicate-and-Amend Method. The Protocol does not address any requirements of regulations regarding posting or collection of initial margin.

 

Protocol Documentation

1. How is the Protocol structured? What is the purpose of the different Protocol documents?

Original Protocol (published August 16, 2016)

The original Protocol is in 8 parts, being the Protocol itself (including the form of Adherence Letter), a form of Questionnaire, and six substantive Exhibits.

  • The Protocol contains the rules setting out how parties can adhere to the Protocol and exchange Questionnaires to amend or create documentation for their derivatives transactions.
  • The six substantive Exhibits contain the specific contractual terms for the Amend Method, Replicate-and-Amend Method and New CSA Method, for each of the three types of collateral document that ISDA has published (New York law, English law and Japanese law forms).
  • The Questionnaire contains the elections that parties need to complete in order to use the Protocol.

 

Two additional documents are also available. First, a form of “PCA Principal Answer Sheet”, which is Annex A to the Questionnaire and can be used by an agent to submit Questionnaire responses on behalf of multiple underlying principals in a single spreadsheet. Second, a form of Recipient PCA Principal Annex, which can be used to designate specific entities as recipients of a Questionnaire. These forms are intended for use where the parties send each other Questionnaires manually (not using ISDA Amend).

Revised EMIR Rules Supplemental Protocol Exhibits (published December 16, 2016, superseding the original EMIR supplements published November 17, 2016)

The Revised EMIR Rules Supplemental Protocol Exhibits (the “Revised EMIR Supplements”) are structured in the same form as the original Protocol, with a Revised EMIR Supplement for each document listed above. The Revised EMIR Supplements add the EMIR Rules as a Covered Margin Regime to the Protocol. The Revised EMIR Supplements replace the original version of the EMIR Supplements published on November 17, 2016 (the “Original EMIR Supplements”). The Revised EMIR Supplements were published to make technical changes to the Original EMIR Supplements, in order to reflect more closely the settlement timing and eligible collateral terms under the final EMIR regulations. The Revised EMIR Supplements are designed to be used in place of the Original EMIR Supplements. As such, only the Revised EMIR Supplements are available in the ISDA Amend Platform for parties exchanging final Questionnaires that designate the EMIR Rules as a Covered Margin Regime. For parties who exchange Questionnaires outside the ISDA Amend platform, the Revised EMIR Supplements provide that they supersede the Original EMIR Supplements, in case parties exchange Questionnaires for both.

Japanese Notification Time Amendments Supplemental Protocol Exhibits (published January 13, 2017)

The Japanese Notification Time Amendments Supplemental Protocol Exhibits comprise a Supplemental Questionnaire, Supplemental Rules Exhibit and a Supplemental Terms Exhibit to the Japanese law New CSA Exhibit. They allow parties to elect alternative Notification Times for a Japanese law New CSA.

Australia Rules Supplemental Protocol Exhibits (published January 20, 2017)

The Australia Rules Supplemental Protocol Exhibits comprise a Supplemental Questionnaire, Supplemental Rules Exhibit and four Supplemental Terms Exhibits, which are to the New York law and English law New CSA Exhibits and Amend/Replicate-and-Amend Exhibits. They allow parties to elect Australia Rules as a Covered Margin Regime for those CSAs.

Non-netting Supplemental Protocol Exhibits (published January 20, 2017)

The Non-netting Supplemental Protocol Exhibits comprise a Supplemental Questionnaire, Supplemental Rules Exhibit and two Supplemental Terms Exhibits, which are to the New York law and English law New CSA Exhibits. They allow parties to create new CSAs in those forms with special terms for use with non-netting counterparties.

Segregation Amendments Supplemental Protocol Exhibits (published January 26, 2017)

The Segregation Amendments Supplemental Protocol Exhibits comprise a Supplemental Questionnaire, Supplemental Rules Exhibit and a Supplemental Terms Exhibit to the New York law New CSA Exhibit. They allow parties to create New York law CSAs where the parties agree that variation margin posted by one party will be held in a third-party segregated account.

MTA Amendment Agreement (published March 17, 2017)

This form of amendment agreement MTA Amendment was prepared for optional use with the Non-netting Supplemental Protocol Exhibits described above. It can be used by two parties to put in place an alternative approach to set the minimum transfer amount for their non-netting New CSA.

Swiss FMIA Rules Supplemental Protocol Exhibits (published May 9, 2017)

The Swiss FMIA Rules Supplemental Protocol Exhibits comprise a Supplemental Questionnaire, Supplemental Rules Exhibit and a Supplemental Terms Exhibit for each of the original six Exhibits. They allow parties to elect FMIA Rules as a Covered Margin Regime. The FMIA Rules Supplemental Questionnaire will not be made available on ISDA Amend, so it can only be exchanged using an alternative method selected by the parties in their Adherence Letters. 

 

2. How do the different Protocol documents work together?

The basic architecture of the Protocol consists of four documents, each as described in further detail below: (I) an Adherence Letter, (II) the Questionnaire (or a Supplemental Questionnaire), (III) the Protocol, and (IV) the applicable substantive Exhibit (and any relevant Supplemental Terms Exhibit).

(I) Adherence Letter

a. Must be signed and submitted by each party agreeing to the terms of the Protocol in order to participate in the Protocol.

i. Adhering parties must include name, legal entity identifier, contact name and address.

ii. Each adhering party must specify the address (electronic or otherwise) and means by which the adhering party will receive Questionnaires.

b. Will be uploaded and available for public view, like all ISDA protocol adherence letters (contact name and address will not be publicly displayed).

(II) Protocol

a. Establishes an agreed process for amending existing derivatives documentation (defined as a “Protocol Covered Agreement”) or to enter into a new ISDA 2002 Master Agreement and CSA (defined as a “Protocol Master Agreement”).

b. Defines a “PCA Principal” as a party who is or may become a principal to one or more swaps under a Protocol Covered Agreement, and a “PCA Agent” as a party who has executed a Protocol Covered Agreement as an agent on behalf of a PCA Principal.

c. Specifies that a person may participate in the Protocol as a PCA Principal or PCA Agent (or both), but that only a party that executed an existing Protocol Covered Agreement (as PCA Principal or PCA Agent on behalf of a PCA Principal) may use the Protocol to supplement that Protocol Covered Agreement. Where a party is entering into a new Protocol Master Agreement, the Questionnaire will define whether it is acting as agent or principal.

d. Provides each PCA Principal and PCA Agent that is directly participating in the Protocol through execution of an Adherence Letter with the ability to amend Protocol Covered Agreements or create Protocol Master Agreements by completing one or more Questionnaires and delivering them in the manner described below.

e. Sets out a number of conditions that Questionnaires exchanged between two parties must meet in order to become “Matched Questionnaires”. (In the case of a Supplemental Questionnaire, any conditions are set out in the related Supplemental Rules Exhibit.)

f. Provides that parties that exchange Matched Questionnaires amend their Protocol Covered Agreement or enter into a Protocol Master Agreement on the terms determined by the information contained in the Matched Questionnaires.

g. Defines the Schedule for any Protocol Master Agreement created by the parties

h. Sets out a process for publication of Supplemental Protocol Exhibits

(III) Questionnaire (including a Supplemental Questionnaire)

a. Lists questions to elicit information from Adhering Parties necessary to determine how the Protocol will apply to each counterparty pair.

b. Provides for the delivery of basic identifying information to determine the party submitting the Questionnaire and the party to whom it is addressed.

i. Parties can send different Questionnaires to different counterparties.

ii. A PCA Agent (e.g., an investment advisor or ERISA fiduciary) who has an existing “umbrella” agreement with a counterparty for multiple underlying clients may complete and deliver a Questionnaire on behalf of all or some of such clients.

c. Allows a PCA Principal to make various elections under the Protocol and under the relevant Exhibit.

d. Can be delivered by an Adhering Party online through ISDA Amend (or using another method of delivery listed in the receiving party's Adherence Letter) exclusively to other Adhering Parties that it has specifically approved.

(IV) Exhibit (or Supplemental Terms Exhibit)

a. The six substantive Exhibits contain the specific terms of amendments to the parties’ existing CSAs, or the terms of New CSAs to be put in place between them.

b. There are three Exhibits for the New CSA Method, one for each form of CSA that ISDA has published.

c. The Amend Method and Replicate-and-Amend Method are both combined in a single Exhibit. There are three such Exhibits, one for each form of CSA that ISDA has published. The differences between the Amend Method and the Replicate-and-Amend Method are set out in each Exhibit.

d. The Exhibit that applies between the parties will depend on the Method they elect in their Questionnaires, and the type of CSA they have in place already in the case of the Amend Method and Replicate-and-Amend Method. For the New CSA, the Exhibit is determined as set out under “How are the terms of the New CSA determined?” above.

e. A Supplemental Terms Exhibit will also apply if the parties exchange the relevant Supplemental Questionnaires and meet any conditions set out in the related Supplemental Rules Exhibit for those Supplemental Questionnaires to be “Matched Supplemental Questionnaires”.

 

Protocol Adherence Mechanics

1. When do I need to adhere to the Protocol?

The Protocol is open on August 16, 2016. There is no cut-off date for adherence. ISDA reserves the right to designate a closing date of this Protocol by giving 30 days’ notice on this site.

2. How do I submit my Adherence Letter?

Each Adhering Party executing an Adherence Letter will access the Protocol Management section of the ISDA website at www.isda.org to enter information online that is required to generate its form of Adherence Letter.  Either by directly downloading the populated Adherence Letter from the Protocol Management system or upon receipt via e-mail of the populated Adherence Letter, each Adhering Party must print, sign and upload the signed Adherence Letter as a PDF (portable document format) attachment into the Protocol Management system.  Once the signed Adherence Letter has been approved and accepted by ISDA, the Adhering Party will receive an e-mail confirmation of its adherence to the Protocol.

The Adherence Letter(s) should be on your institution’s letterhead, which you are able to upload into the Protocol Management system during the online submission of information to generate the Adherence Letter. Nothing in the form of Adherence Letter available on ISDA’s website may be changed with the exception of completing the details of your institutional name, LEI, date and signature block. ISDA keeps the executed copy of the Adherence Letter for its files and does not share the executed copy with anyone else. Please do not send your original Adherence Letter(s) by mail to ISDA.

3. What is a conformed copy?

A conformed copy of the Adherence Letter means that the name of the authorized signatory (for example, Patricia Smith) is typed rather than having Patricia Smith’s actual signature on the letter. ISDA posts on its website the conformed copy of all Adherence Letters so that they may be viewed by all Adhering Parties.

4. Who is an authorized signatory?

An authorized signatory to the Adherence Letter is an individual who has the legal authority to bind the adhering institution.

5. What is a Pre-LEI/LEI number?

An Pre-LEI/LEI number is a Legal Entity Identifier ("LEI") that should correspond directly to the True/Legal Name of the adhering entity.  LEIs are issued by “Local Operating Units” (LOUs) of the Global LEI System.

6. Is an LEI mandatory for adherence?

Yes, you must enter an LEI number to adhere to this protocol.  An LEI number must be in the correct format (20 alphanumeric characters A-Z/0-9).  If we cannot verify the LEI number you do have the option to continue with your adherence by clicking the “Proceed with unverified Pre-LEI/LEI” checkbox.

7. What is the Adherence Letter ID?

An Adherence letter ID is an identification code that is unique to your adherence letter. If you are using ISDA Amend to deliver your questionnaires, there will be a section where you will be asked, (a) if you have submitted an adherence letter and; (b) to enter the Adherence Letter ID.  This code matches your adherence letter with your questionnaire(s).  You cannot complete matching on the ISDA Amend platform without this number.

8. Where do I find the Adherence Letter ID?

When your adherence letter has been accepted by ISDA administrators, an email is automatically sent to you (from “IT Admin”) which contains a URL that will take you to the section of the ISDA website where the ID code is listed, specifically the protocol shopping cart. If you do not have this email then use the reference number/contact email address combination under “View Open Order”, which will also take you to the shopping cart.  If you don’t have your reference number you can click on the “Cant find the confirmation number” link available and ISDA will send this to you.   Please remember to check your junk email if you are having trouble locating emails.

9. Can I change the text of the Adherence Letter?

No. The Adherence Letter must be in the same format as the form letter published in the Protocol.

10. Are there any costs to adhere to the Protocol?

Each Adhering Party must submit a one-time fee of U.S. $1,000 to ISDA at or before the submission of this Adherence Letter.